Estimation of Agricultural Production Relations in the LUC Model for China

Albersen, P., Fischer, G., Keyzer, M.A., & Sun, L. (2000). Estimation of Agricultural Production Relations in the LUC Model for China. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-00-027

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Abstract

Chinas demand for feed-grains has been growing fast during the last two decades, largely due to the increasing meat demand. This raises the important question whether China will in the coming years be able to satisfy these increasing needs which has implications that reach far beyond the country itself, especially in the light of Chinas upcoming accession to WTO. The answer depends on many factors, including the policy orientation of the Chinese government, the loss of cropland caused by the ongoing industrialization and urbanization processes, and the effect of climate change on the agricultural potentials of the country.

To analyze these issues, the Land Use Change (LUC) Project is engaged in the development of an intertemporal welfare maximizing policy analysis model. The present report presents the input-output relationships for agricultural crops in this model. The specified relationships are geographically explicit and determine the crop output combinations that can be achieved, under the prevailing biophysical conditions across China, from given input combinations in each of some 2040 counties, on the basis of data for 1990. The inputs are chemical and organic fertilizer, labor and machinery. Irrigated and rain-fed land is distinguished as separate land-use types. Distinct relationships are estimated by cross-section for eight economic regions distinguished in the LUC model. The biophysical potential enters as an asymptote in a generalized Mitscherlich-Baule (MB) yield function and is computed on the basis of an agro-ecological assessment of climatic and land resources, including irrigation. The chosen form globally satisfies the required slope and curvature conditions.

Estimation results show that all key parameters are significant and are of the expected sign. The calculated elasticities of aggregate output with respect to inputs reflect rather closely the relative scarcity of irrigated land, labor and other inputs across the different regions. It also appears that if account is taken of the distance to main urban centers, the observed cropping patterns are generally consistent with profit maximization. Confirmation is found for the often noted labor surplus in the Southern and South-Eastern regions.

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